Viasat (VSAT) Recent Earnings

Viasat (VSAT) reported 2nd Quarter September 2016 earnings of $0.24 per share on revenue of $399.2 million. The consensus estimate was a loss of $0.02 per share on revenue of $373.8 million. Revenue grew 13.0% on a year-over-year basis.

Viasat Inc is engaged in the provision of high-speed fixed and mobile broadband services. The Company also offers advanced satellite and other wireless networks and secure networking systems, products and services.

ViaSat Announces Second Quarter Fiscal Year 2017 Results

ViaSat Inc. (VSAT), a global broadband services and technology company, today announced financial results for the fiscal second quarter ended September 30, 2016.

"We had a very strong second fiscal quarter. Our government business showed exceptional growth, satellite services continued to steadily increase earnings and revenues driven by ARPU gains and growth in in-flight Wi-Fi services and our record new contract awards are indicative of sustained demand for both our products and services," said Mark Dankberg, ViaSat chairman and CEO. "For the first six months, Adjusted EBITDA grew twice the rate of revenue excluding the impact of R&D expenses associated with the internal development of our next-generation ViaSat-3 class satellite payloads. Continued earnings and operating cash flow growth demonstrated the attractive economics of our network in the residential and aero markets, where we now have contracts with eight commercial airlines globally, and we maintained strong positioning in key government sectors including tactical data links, broadband mobility and IP network security. The ViaSat-2 satellite is expected to ship before calendar year-end, and were making exciting early progress on our ViaSat-3 platform, which will significantly expand our bandwidth resources, lower our costs, increase our geographic footprint and expand our addressable markets as we position to deliver abundant, cost-effective broadband access on a global scale."

Financial Results

(In millions, except per share data)

Q2 FY17

Q2 FY16

Year-Over- First 6

First 6

Year-

Year

Months

Months

Over-Year

Change

FY17

FY16

Change

Revenues

$

399.2

$

353.3

13.0%

$

762.3

$

697.7

9.3%

Net income,1

$

11.0

$

4.9

123.2%

$

12.9

$

7.5 70.7%

Non-GAAP net income1

$

20.3

$

14.9

36.8%

$

31.6

$

27.0

17.2%

Adjusted EBITDA

$

93.2

$

86.5

7.7%

$

173.4

$

164.1

5.7%

Diluted per share net income1

$

0.22

$

0.10

120.0%

$

0.26

$

0.15

73.3%

Non-GAAP diluted per share net income1 $

0.40

$

0.30

33.3%

$

0.63

$

0.55

14.5%

Fully diluted weighted average shares

50.5

49.1

2.9%

50.4

49.0

2.9%

New contract awards

$

586.1

$

386.2

51.8%

$

922.4

$

691.7

33.4%

Sales backlog2

$

1,091.4

$

897.8

21.6%

$

1,091.4

$

897.8

21.6%

Segment Results

(In millions)

Q2 FY17

Q2 FY16

Year-Over- First 6

First 6

Year-

Year

Months

Months

Over-Year

Change

FY17

FY16

Change

Satellite Services

New contract awards

$

149.2

$

127.6

16.9%

$

291.0

$

247.9

17.4%

Revenues

$

156.3

$

140.2

11.5%

$

308.7

$

272.6

13.2%

Operating profit3

$

32.6

$

21.0

54.7%

$

63.4

$

38.1

66.5%

Adjusted EBITDA

$

73.9

$

61.9

19.4%

$

145.8

$

116.5

25.2%

Commercial Networks

New contract awards

$

51.3 $

41.8

22.8%

$

114.2

$

88.0

29.8%

Revenues

$

65.5 $

66.4

(1.4)%

$

131.0

$

133.1

(1.6)%

Operating loss3

$

(40.9) $

(22.3)

(83.2)%

$

(79.4) $

(41.0)

(93.5)%

Adjusted EBITDA

$

(25.6) $

(9.0) (185.7)%

$

(49.8) $

(15.1)

(230.3)%

Government Systems

New contract awards

$

385.6

$

216.8

77.8%

$

517.2

$

355.8

45.4%

Revenues

$

177.4

$

146.8

20.9%

$

322.6

$

292.0

10.5%

Operating profit 3

$

29.0

$

19.7

47.4%

$

47.0

$

35.6

31.9%

Adjusted EBITDA

$

44.7

$

33.6

32.8%

$

77.5

$

62.5

23.8%

1 Attributable to ViaSat, Inc. common stockholders.

2 Amounts include certain backlog adjustments due to contract changes and amendments.

3 Before corporate and amortization of acquired intangible assets.

Companion Announcement from November 8, 2016:

• Subsequent to the end of the second quarter of fiscal year 2017, ViaSat was selected by a North American airline to retrofit more than 500 aircraft from its existing, mainline domestic fleet with ViaSats highly advanced in-flight internet system. Installation under this contract is expected to begin in summer 2017.

Satellite Services In the second quarter of fiscal year 2017, ViaSats Satellite Services segment recorded its fifth consecutive quarter of revenue growth, up 11% year-over-year. Operating profit increased 55% year-over-year to $32.6 million, and Adjusted EBITDA rose to $73.9 million, a 19% increase over the same period last year. Adjusted EBITDA margins also increased to over 47%, up 3% from the second quarter of fiscal year 2016. Profitable growth was driven by expanded residential services offerings, which drove higher Average Revenue Per User (ARPU), as well as an increase in the number of commercial aircraft that have installed ViaSats high-speed in-flight internet system. Highlights for the quarter include:

• ViaSat served 686,000 residential subscribers at the close of the second quarter of fiscal year 2017, which was relatively flat compared to the 687,000 residential subscribers at the end of second quarter of fiscal year 2016.

• Expanded residential broadband service offerings, including new premium service plans and value-added service bundles, drove ARPU in the residential broadband internet business to a new record high of $61.55, up $5.31 per subscriber or 9% on a year-over-year basis.

• ViaSat continued to execute on its global strategy to deliver high-quality satellite-based in-flight internet to the commercial air market with new European contracts announced with Finnair and SAS.

• At the close of the second quarter of fiscal year 2017, ViaSats in-flight internet service was deployed on 533 commercial aircraft.

Year-to-date, Satellite Services segment results reached record highs, with revenue growth of 13% to $308.7 million and an operating profit increase of 67% year-over-year to $63.4 million. Adjusted EBITDA of $145.8 million was up 25% over the same period last year.

Commercial Networks ViaSats Commercial Networks segment, as anticipated, reflected higher investments in next-generation technologies. Quarterly revenues were down slightly compared to the same period last year. Research and development (R&D) expenses were up 63% year-over-year, primarily due to R&D expenses associated with internal development of the ViaSat-3 payloads and in expanding the commercial in-flight internet solution portfolio. As a result, segment operating losses were higher and Adjusted EBITDA was lower for the second quarter of fiscal year 2017, as compared to the same period last year. Highlights for the quarter include:

• ViaSat-2 successfully completed environmental testing and end-to-end terminal compatibility testing between the satellite and ground system. ViaSat-2 is currently undergoing the final integration phase and is on schedule for completion. The satellite is expected to be ready to ship to the launch site in early December 2016.

• One year into the ViaSat-3 program, the first two ViaSat-3 class satellites continued to be on schedule with spacecraft preliminary design review (PDR) planned for mid-November 2016. Engineering models of payload modules are running in laboratories at ViaSats Tempe, Arizona facility, and Boeing Satellite Systems continues to proceed on schedule with design and development of the satellite platform.

Year-to-date, Commercial Networks segment revenues were lower, operating loss was higher and Adjusted EBITDA was lower compared to the same period last year.

Government Systems In the second quarter of fiscal year 2017, ViaSats Government Systems segment achieved record highs in revenues, as well as strong increases in operating profit and Adjusted EBITDA. Strong new government contract awards of $385.6 million pushed second quarter segment backlog to $670.0 million and total company-wide backlog to $1.1 billion - each marking a new record. Revenues increased 21% to $177.4 million compared to the prior year period, while operating profit grew significantly, up 47% to $29.0 million, and Adjusted EBITDA grew 33% to $44.7 million. Operating profit and Adjusted EBITDA expansion were driven by strong growth in cybersecurity and information assurance products, as well as tactical data links product revenues and government managed Wi-Fi services revenues. Highlights for the quarter include:

• ViaSat was awarded a government contract for the Protected Tactical Service Field Demonstration, to develop a Protected Tactical Waveform modem and embedded cryptographic unit for wideband anti-jam communications across both government and commercial satellites.

• Space and Naval Warfare Systems Command awarded ViaSat a sole source contract for engineering, technical services and hardware/software products in support of the U.S. Navys joint Ultra High Frequency military satellite communications system.

• ViaSat introduced the first 100 Gbps Type 1 Ethernet encryptor, and achieved National Security Agency-certification for two new network encryptors.

• ViaSat announced new service offerings to authorized Navy Exchange customers, including those located at Naval Station Guantanamo Bay in Cuba.

• Industry research firm Frost and Sullivan named ViaSat top Communications Contractor to the U.S. Department of Defense in its latest Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) report. ViaSat was also recognized in the Defense News Top 100 Defense Contractor list, having moved up 12 positions, with the highest organic growth of any U.S. defense company.

On a year-to-date basis, ViaSats Government Systems segment revenues grew 10% to $322.6 million. Operating profit increased 32% year-over-year to $47.0 million, generating Adjusted EBITDA of $77.5 million, a 24% increase over the same period last year.

Conference Call ViaSat will host a conference call to discuss the second quarter of fiscal year 2017 results. Details follow:

DATE/TIME: Tuesday, November 8, 2016 at 5:00 p.m. Eastern Time

DIAL-IN:

(877) 640-9809 in the U.S.; (914) 495-8528 international

WEBCAST:

investors.viasat.com.

REPLAY:

Available from 8:00 p.m. Eastern Time on Tuesday, November 8 until 11:59 p.m. Eastern Time on Wednesday, November 9 by dialing (855) 859-2056 for U.S. callers and (404) 537-3406 for international callers; conference ID 12129423.

Forward-Looking Statements This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements include, among others, statements that refer to opportunities, growth and outlook for fiscal year 2017 and beyond; satellite construction and launch activities; the performance and benefits of our ViaSat-2 and ViaSat-3 class satellites; the expected completion, capacity, service, coverage, service speeds, availability and other features of our satellites, and the timing, cost, economics and other benefits associated therewith; international expansion plans; and the roll-out and uptake of products and services by, and services offered by, our airline partners as well as our commercial networks and government systems customers. Readers are cautioned that actual results could differ materially from those expressed in any forward-looking statements. Factors that could cause actual results to differ include: our ability to realize the anticipated benefits of the ViaSat-2 and ViaSat-3 class satellites; unexpected expenses related to our satellite projects; our ability to successfully implement our business plan for our broadband satellite services on our anticipated timeline or at all; risks associated with the construction, launch and operation of our satellites, including the effect of any anomaly, operational failure or degradation in satellite performance; our ability to consummate our proposed strategic partnership arrangement with Eutelsat and to realize the anticipated benefits thereof; our ability to successfully develop, introduce and sell new technologies, products and services; audits by the U.S. government; changes in the global business environment and economic conditions; delays in approving U.S. government budgets and cuts in government defense expenditures; our reliance on U.S. government contracts, and on a small number of contracts which account for a significant percentage of our revenues; reduced demand for products and services as a result of continued constraints on capital spending by customers; changes in relationships with, or the financial condition of, key customers or suppliers; our reliance on a limited number of third parties to manufacture and supply our products; increased competition; introduction of new technologies and other factors affecting the communications and defense industries generally; the effect of adverse regulatory changes on our ability to sell products and services; our level of indebtedness and ability to comply with applicable debt covenants; our involvement in litigation, including intellectual property claims and litigation to protect our proprietary technology; and our dependence on a limited number of key employees. In addition, please refer to the risk factors contained in our SEC filings available at www.sec.gov, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements for any reason.

About ViaSat ViaSat, Inc. (VSAT) keeps the world connected. As a global broadband services and technology company, ViaSat ensures consumers, businesses, governments and military personnel have communications access - anywhere - whether on the ground or in-flight. The Companys innovations in designing highest-capacity satellites and secure ground infrastructure and terminal technologies coupled with its international network of managed Wi-Fi hotspots enable ViaSat to deliver a best available network that extends the reach and accessibility of broadband internet service, globally. For more information, visit: www.viasat.com, or follow ViaSat on Facebook, Twitter, LinkedIn or YouTube.

Use of Non-GAAP Financial Information To supplement ViaSats consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), ViaSat uses non-GAAP net income (loss) attributable to ViaSat Inc. and Adjusted EBITDA, measures ViaSat believes are appropriate to enhance an overall understanding of ViaSats past financial performance and prospects for the future. We believe the non-GAAP results provide useful information to both management and investors by excluding specific expenses that we believe are not indicative of our core operating results. In addition, since we have historically reported non-GAAP results to the investment community, we believe the inclusion of non-GAAP numbers provides consistency in our financial reporting and facilitates comparisons to the Companys historical operating results. Further, these non-GAAP results are among the primary indicators that management uses as a basis for evaluating the operating performance of our segments, allocating resources to such segments, planning and forecasting in future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of specific adjustments to GAAP results is provided in the tables below.

Copyright ? 2016 ViaSat, Inc. All rights reserved. All other product or company names mentioned are used for identification purposes only and may be trademarks of their respective owners. ViaSat is a registered trademark of ViaSat, Inc.

Condensed Consolidated Statement of Operations

(Unaudited)

(In thousands, except per share data)

Three months ended

Six months ended

September 30, 2016

September 30, 2015

September 30, 2016

September 30, 2015

Revenues:

Product revenues

$

187,235

$

163,660

$

347,911

$

332,008

Service revenues

211,923

189,670

414,377

365,700

Total revenues

399,158

353,330

762,288

697,708

Operating expenses:

Cost of product revenues

136,825

116,179

257,505

242,009

Cost of service revenues

134,241

124,595

261,823

242,204

Selling, general and administrative

77,224

73,351

156,624

144,458

Independent research and development

30,177

20,792

55,354

36,400

Amortization of acquired intangible assets

2,277

4,587

4,790

9,397

Income from operations

18,414

13,826

26,192

23,240

Interest expense, net

(4,079)

(6,098)

(8,890)

(11,986)

Income before income taxes

14,335

7,728

17,302

11,254

Provision for income taxes

3,596

2,808

4,406

3,815

Net income

10,739

4,920

12,896

7,439

Less: Net (loss) income attributable to the noncontrolling interest, net of tax

(280)

(16)

22

(105)

Net income attributable to ViaSat Inc.

$

11,019

$

4,936

$

12,874

$

7,544

Diluted net income per share attributable to ViaSat Inc. common stockholders

$

0.22

$

0.10

$

0.26

$

0.15

Diluted common equivalent shares

50,533

49,125

50,393

48,995

AN ITEMIZED RECONCILIATION BETWEEN NET INCOME ATTRIBUTABLE TO VIASAT INC.

ON A GAAP BASIS AND NON-GAAP BASIS IS AS FOLLOWS:

Three months ended

Six months ended

September 30, 2016

September 30, 2015

September 30, 2016

September 30, 2015

GAAP net income attributable to ViaSat Inc.

$

11,019

$

4,936

$

12,874

$

7,544

Amortization of acquired intangible assets

2,277

4,587

4,790

9,397

Stock-based compensation expense

12,657

11,574

25,418

22,283

Income tax effect

(5,631)

(6,240)

(11,470)

(12,251)

Non-GAAP net income attributable to ViaSat Inc.

$

20,322

$

14,857

$

31,612

$

26,973

Non-GAAP diluted net income per share attributable to ViaSat Inc. common stockholders $

0.40

$

0.30

$

0.63

$

0.55

Diluted common equivalent shares

50,533

49,125

50,393

48,995

AN ITEMIZED RECONCILIATION BETWEEN NET INCOME ATTRIBUTABLE TO VIASAT INC.

AND ADJUSTED EBITDA IS AS FOLLOWS:

Three months ended

Six months ended

September 30, 2016

September 30, 2015

September 30, 2016

September 30, 2015

GAAP net income attributable to ViaSat Inc.

$

11,019

$

4,936

$

12,874

$

7,544

Provision for income taxes

3,596

2,808

4,406

3,815

Interest expense, net

4,079

6,098

8,890

11,986

Depreciation and amortization

61,822

61,118

121,820

118,429

Stock-based compensation expense

12,657

11,574

25,418

22,283

Adjusted EBITDA

$

93,173

$

86,534

$

173,408

$

164,057

AN ITEMIZED RECONCILIATION BETWEEN SEGMENT OPERATING PROFIT (LOSS) BEFORE

CORPORATE AND AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS AND ADJUSTED EBITDA IS AS FOLLOWS:

* Depreciation expenses not specifically recorded in a particular segment have been allocated based on other indirect allocable costs, which management believes is a reasonable method.

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands)

As of

As of

As of

As of

Assets

September 30, 2016

March 31, 2016

Liabilities and Equity

September 30, 2016

March 31, 2016

Current assets:

Current liabilities:

Cash and cash equivalents

$

51,275

$

42,088

Accounts payable

$

97,783

$

95,645

Accounts receivable, net

276,497

286,724

Accrued liabilities

186,407

184,344

Inventories

151,631

145,161

Total current liabilities

284,190

279,989

Prepaid expenses and other current assets** 49,302

47,583

Senior Notes, net**

575,352

575,304

Total current assets

528,705

521,556

Other long-term debt, net**

485,124

370,224

Other liabilities

38,602

37,371

Total liabilities

1,383,268

1,262,888

Property, equipment and satellites, net

1,539,588

1,385,107

Other acquired intangible assets, net

28,742

33,604

Total ViaSat Inc. stockholders equity 1,194,639

1,129,103

Goodwill

116,404

117,040

Noncontrolling interest in subsidiary

5,328

5,321

Other assets**

369,796

340,005

Total equity

1,199,967

1,134,424

Total assets

$

2,583,235

$

2,397,312

Total liabilities and equity

$

2,583,235

$

2,397,312

** The Company adopted Accounting Standards Updated 2015-03 Interest -- Imputation of Interest (ASC 835-30): Simplifying the Presentation of Debt Issuance Costs retrospectively during the first quarter of fiscal 2017 and resultantly reclassified unamortized debt issuance costs as a direct deduction from the carrying amount of the Senior Notes and other long-term debt for all periods presented.